As Gibson Dunn battles to protect its image while partner Peter Gray fights to protect his reputation, what can firms learn about how to manage a crisis?
If you’re looking for a safe bet after the Grand National you could do worse than put a few quid on Gibson Dunn & Crutcher’s top brass not having loved 2015 so far.
A case that has rumbled on for years (see Timeline, overleaf) hit the headlines for all the wrong reasons in early March when it emerged that Dubai-based Gibson Dunn & Crutcher partner Peter Gray was facing allegations he had misled the High Court during a hearing two years previously.
Gray was soon to undergo a three-day cross-examination by Dominic Kendrick QC and his firm’s management faced a situation with all the hallmarks of a potential reputational crisis.
The case in question, Republic of Djibouti & Ors v Mr Abdourahman Boreh, was launched by the African nation against one of its wealthiest citizens following a terrorist attack in Djibouti City in 2009.
After three years chasing Boreh through the Middle East, continental Europe and finally to England, the Djiboutian authorities brought court proceedings against him in London in late 2012 (see Timeline, below).
Events ultimately led to Gray’s cross-examination and Gibson Dunn’s need for crisis management skills.
Anti-corruption questions
For Gibson Dunn, the case and the headlines it inspired, spurred on by Gray’s decision to appeal, has put the firm in the spotlight for almost three months. There is no sign of the furore abating until a final decision by the firm and by the courts on Gray’s future is reached.
Among other issues the case throws into sharp relief Gray’s numerous tweets deriding Government-level corruption in places such as Nigeria and the UAE.
It also casts a long shadow over the US firm’s regular sponsorship of the Cambridge International Symposium on Economic Crime, an event run by anti-fraud organisations including the International Association of Anti-Corruption Authorities to tackle financial and political corruption worldwide.
Stateside, Gibson Dunn famously – and now it seems somewhat ironically – used a claim of fraud to, bit by bit, overturn the largest environment verdict in history for its client Chevron Corporation last year.
The firm took over a colossal transnational litigation for Chevron to challenge a $19bn (£13bn) judgment against the oil company for polluting the Ecuadorean rainforest in a case that heavily featured attorney ethics and the behaviour of opponent firm Squire Patton Boggs and claimant lawyer Steven Donziger.
The litigation ended when Squire Patton Boggs handed $15m to Gibson Dunn’s client Chevron to drop its claims of fraud and racketeering, although Gibson Dunn’s own lawyers did not go without criticism and sanctions from at least two federal court judges for their questionable tactics during the mammoth case.
Reputations at risk
Gibson Dunn is one of the world’s largest law firms. Last year it posted a global revenue of $1.47bn – a 6 per cent rise – in its 19th consecutive year of growth.
It is unlikely the apparent failings of one partner could change that. But there is no escaping the fact that during the High Court proceedings last month Mr Justice Flaux was particularly scathing about the operations of Djibouti’s lawyers, specifically Gray.
While Flaux J did not implicate Gibson Dunn in Gray’s “dishonesty”, MD Communications managing director Melissa Davis argues the firm must accept its name will be tied to the actions of its staff, employees or, in this case, co-owner.
The way to handle a media circus, says Davis – a specialist on providing crisis management advice to law firms – is to “act fast” and publicly “appear co-operative with regulators, law enforcement and the media”.
In this case, says Davis, the firm “acted swiftly to suspend the lead partner and make a statement, which looks like an assertive first move – what comes next is even more important”.
Appearing to be evasive or not in control of events will do the greatest lasting damage to a firm’s reputation, Davis says.
“While remaining fair to those affected it can often be better to be seen to go further than the minimum required to respond to a situation,” she adds. “It’s never going to be the best few days in the office, but people judge you by how you respond under pressure, so there might even be some creditable effect for the firm if it does this right.”
Dealing with a crisis – top five tips from reputational experts
- Act fast. Make a strong, assertive first move.
- Appearing to be evasive or not in control of events will do the greatest lasting damage to a firm’s reputation.
- Take control. Assess the individual situation and react to that.
- It can often be better to be seen to go further than the minimum required to respond to a situation.
- While any firm facing a crisis may take a short-term kicking, it’s how it deals with the recovery period that will define that firm’s reputation. You are judged by how you respond when under such pressure, so handle the crisis correctly and there may even be some creditable effect.
Great law firm debacles
This is not the first time the actions of an apparently rogue partner or even a deal-gone-bad has had a negative impact on a firm’s reputation.
Hogan Lovells
In 2012 former Hogan Lovells partner Christopher Grierson was jailed for three years after defrauding the firm of £1.27m through falsified invoices.
The firm’s party line managed to sound “sad but reassuring”, says MD Communications’ Melissa Davis, who says “a core internal communications group with the power to get all the information out” was vital to the sympathetic and muted coverage the debacle received.
Freshfields
Way back in 2004 Freshfields Bruckhaus Deringer suffered a humiliating defeat in the courts over its row with Marks & Spencer over the retailer’s objection to the firms’ instruction to act for Philip Green’s consortium on its takeover bid.
The conflict centred on Green’s attempted £9bn takeover of M&S in 2004. Freshfields partner Barry O’Brien accepted an instruction from Green’s bid vehicle despite M&S being a corporate client of the firm.
While Freshfields had not been M&S’s go-to firm for some years it still had a matter open – the contract between the high street chain and the designer of its Per Una line George Davies.
Costs awarded to M&S reached around £350,000 and left the magic circle firm out in the cold on the biggest takeover bid of the year. O’Brien, meanwhile, faced £9,000 in fines for two breaches of the
Solicitors’ Code of Conduct along with the Law Society’s £50,000 costs (Freshfields picked up the bill).
“At the end of the day, for a firm that size they made a judgement call on a conflict of interest and were wrong,” says Davis. “Note though, that they communicated with the media throughout, finding in the conclusion a way to say the conflict was never a danger without disrespecting the court.” This was key in maintaining face once the headlines died down.
Clifford Chance
Perhaps the most potentially damaging slip-up to hit the reputation of a top 10 firm in recent memory was the notorious Clifford Chance ‘padding-gate’ scandal more than a decade ago.
The firm was forced to mount a global charm offensive to rebuild its battered reputation after a leaked memo suggested junior lawyers in the US were inflating recorded hours to meet targets.
Despite the firm categorically denying that ‘padding’ took place in the firm it was embarrassing for staff at all levels.
A spokesperson for the firm admitted at the time, “it is embarrassing. We’ve got to be big boys and take this on the chin. We have a lot of work to do to reassure our clients and our staff”.
How should Gibson Dunn play this?
Dealing with negative publicity is part and parcel of running a powerful and newsworthy global business such as an international law firm, says Richard Elsen, co-founder of Byfield Consultancy and former deputy head of Labour’s rapid rebuttal and media attack unit.
It’s how you handle the aftermath that defines you, he says.
Elsen believes the difficulty in the Gibson Dunn case will be to what extent the firm finds it appropriate to distance itself from the partner in question, Gray, and whether the solution is to throw him to the lions to save face or if that could have further negative consequences.
The rumour mill
“The negative publicity and public shaming of Gibson Dunn has unquestionably damaged the reputation of the firm,” argues Elsen. “It is also an unwelcome distraction on both sides of the Atlantic. It’s always a difficult call for law firms in such situations about how far to go in distancing themselves from individuals and events.
“Peter Gray’s appeal will do nothing in terms of the issue going away anytime soon, and the firm will need to take care in responding to events as they unfold.”
Chris Gilmour, crisis management director at London PR agency Beattie Communications, says that any case where the honesty of a partner is being called into question raises questions about the culture of a firm.
Wide berth
“Some people will think, ‘why did he think he could get away with it?’” adds Gilmour. ”There’s a chance it could have been seen as endemic to the firm, so the only response is for the firm to distance itself from the incident. When you’re dealing with situations like this you’re always going to take a short-term kicking. It’s how you deal with the recovery period that defines a firm’s reputation.”
The fact Gray is based in Dubai could be Gibson Dunn’s saving grace in this case, although it could also have a negative impact. On one hand it means its US head-quarters is suitably removed to distance itself, but on the other it has brought an unwelcome focus on the way the firm works in the Middle East.
“Maintaining business in that part of the world will be the biggest challenge because so much work in the Middle East is based on personal relationships and recommendations,” adds Gilmour. ”This could be damaging to Gibson Dunn’s reputation in Dubai, if not necessarily worldwide.”
Certainly, Gibson Dunn has not held back from pointing out that Gray is a Dubai partner in its communications.
“Because of the case happening in the London courts there was a danger people could assume it was a UK partner, but the firm has done everything it can to put jurisdiction on it to protect its central base,” adds Gilmour.
Shut down the press
“When Clifford Chance had the issue with the trainee who expressed militant views on YouTube the firm shut down to the press completely. It was a clever move. Instead, they asked partners what they thought about the issue.
“It was the right reaction. You’ve got to react to the individual situation. I think Gibson Dunn has done everything it can, it’s taken control. It’s thinking beyond day-to-day press office statements to how this will effect its long-term reputation among its clients.”
The Djibouti case
Authorities in Djibouti alleged Abdourahman Boreh had been implicit in terrorist attacks – a series of grenade explosions on the premises of Nougaprix supermarket – and they had the evidence to prove it: two phone transcripts won by tapping phone conversations apparently on the day of the attack in which he appeared, in coded terms, to make reference to his involvement.
Based on the transcripts and a confession-under-duress by another man implicated in the phone call, Mohammed Abdillahi, Djibouti sentenced Boreh in absentia to 15 years’ imprisonment for his role in the attacks.
But it was eventually discovered that the transcripts proved nothing at all. The Gibson Dunn legal team representing Djibouti discovered around a year later – in autumn 2013, when an associate checked the call logs and another flew out to Djibouti to follow up on some irregularities – that the transcripts had been incorrectly dated. The phone calls in fact took place a day before the terrorist attacks and as such made no reference to them at all.
The seeds of the scandal
What Gray, disputes partner at Gibson Dunn in Dubai, and his team did (or did not do) next lies at the heart of the scandal that has done little to enhance the image of the international firm.
According to Mr Justice Flaux Gray described the discovery of the date difference as “massive” at the time he discovered it. It called into question the conviction of Boreh and would ultimately call into question the basis on which Gray et al would apply for a freezing order on Boreh’s assets and an extradition request made against him in the London courts.
Indeed, Flaux J said on a later date that the transcripts were key to his decision to impose a freezing order on $100m (£65m) of funds in Boreh’s bank account.
Gray did not make plain the error, but instead is recorded in emails that came to light a year later saying he was “going to fudge the error of the date” as “it doesn’t affect the underlying evidence”.
Instead of informing the court of the issue, he wrote emails suggesting the transcripts still evidenced terrorism on the basis that they were suspicious, even if they could not be linked to the attack for which Boreh had been convicted.
Interpol gets involved
Gray then led a team of Gibson Dunn lawyers through a request to Interpol using Flaux J’s judgment regarding the freezing order as a finding of fact that meant Djibouti’s extradition request should be taken seriously. Gray also contacted defence departments in the US, including Homeland Security and the FBI, with the judgment.
Almost a year later, in September 2014, Boreh’s legal team, led by Byrne and Partners’ Yvonne Jeffries, was made aware of the misdating issue by a source working on the case for Boreh in Djibouti. They took it before Flaux J who ordered affidavits to discover who knew what and when – the first of six Gray would go on to sign.
The judge described Gray’s actions as an “evasive” attempt to conceal his knowledge of the matter from his opponent and called it a “breathtaking” attempt “by an English solicitor and partner in a City firm to justify a positively misleading letter to the other side’s solicitors”.
Gray’s case was that it was a “serious misjudgement” but maintained throughout his evidence that he had not intended to mislead the court and had “certainly not done so deliberately”.
Flaux J thought differently, ruling on 22 March this year that Gray “deliberately misled the court at the 10-11 September 2013 hearing and that there is cogent evidence to that effect”.
Explaining his decision, he said: “Despite [Gray’s] knowledge that the [Djibouti] conviction was unsafe and the evidence on which it was based was unreliable, from 26 August 2013 onwards he adopted a strategy of not revealing this to any court or outside agency, such as Interpol.”
Gray contested this in an appeal in April during which his counsel, Mark Simpson QC, argued that Flaux J’s conclusions were “clearly flawed”.
The David Haigh case
The repercussions of Flaux J’s damning judgment on Gray are still unknown, although it is expected the solicitor could face disbarment or even criminal charges.
Whatever happens, it is likely that Gray’s time in the spotlight is not over thanks to separate criminal proceedings brought against him and two of his former clients in March by ex-Leeds United FC managing director David Haigh.
Haigh claims Gray, alongside Hisham Al Rayes and Jinesh Patel (chief executive and director of Leeds’ former owners GFH Capital), lured him to Dubai, where he is now in prison. Gray is involved as he worked with GFH after the company instructed Gibson Dunn on its fraud claim against Haigh.
Haigh alleges the trio worked together to have him imprisoned indefinitely under Sharia law on suspicion that he falsified £3m of invoices while working at the club, where he was also general counsel.
Parallels between the two cases have been drawn in Haigh’s court application. Gray successfully obtained a worldwide freezing order on Haigh’s bank accounts in June 2014, meaning he is unable to pay his legal team. Haigh’s lawyers, Stephenson Harwood and Alun Jones QC, are working on a conditional fee arrangement until they can be paid.
Haigh’s claim reads: “In each [case], Mr Gray has been involved in manipulating proceedings in which a person against whom his firm was acting was kept under compulsion in Dubai: one on bail; the other, Mr Haigh, in prison.”
Gray is being represented by Peters & Peters in these proceedings. Gray, Al Rayes and Patel dispute the allegations.
